Goldman Sachs Resignation Fallout Should Help, Not Hurt, RIAs

Wall Street is obsessed with the bombshell resignation from Goldman Sachs announced in a New York Times op-ed column. Should financial planners care? Will the accusations of Greg Smith — that the banking behemoth cares deeply about its bottom line but not so much about its clients — give clients nationwide a new reason to be wary of their advisors?

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> As CEO of a new RIA firm I have gotten emails and calls non stop on that goldman op -ed--I can say that it is helping us and we feel that the culture of greed at the big firms that puts itself ahead of clients and diminishes the humanity and creativity of the individual is what we are fighting against every day. People are more important than profits, and when you put them first either as clients or employees, profits will follow. Unfortunately the cultures that the firms have created promote only those that can bully downwards and are craven upwards. By toadying to your bosses and threatening your reports you never get any real answers and management runs from one fire to another. Cowardice and fear reign at these firms, innovation, straight conversation, and inclusive leadership are gone.

Posted by tony s | Friday, March 16 2012 at 5:33PM ET

If we drill down past implications for our industry and profession, we see it still boils down to people - their values, their aspirations, the cultures that shape them, the way in which they carry out their practice. With the revelations of a Goldman Sachs insider comes real credibility to the claims, assertions and testimonials of those outside the culture who have been impacted by Goldman.

However, change will not come to Wall Street, nor to its culture which shapes our values as a country with regards to money until individuals resolve one by one to be trusted advisors over becoming wealthy as product and deal salesmen and women.

At the moment, I'm afraid, there is NO "high moral ground" on Wall Street.

Within the brokerage industry there is no large scale institutionalized support for fiduciary standing that makes advice, safe, scalable, easy to execute and manage. RIAs have no scale and broker/dealers with scale will not acknowledge fiduciary standing of the broker. It is long established that broker/dealers, whether large or small, independent or employee firms do not acknowledge or support fiduciary standing. So, RIAs aligning with an independent broker/dealer for their support of fiduciary counsel essential for an RIA to function is at best highly misleading.

Just ask the broker/dealer whether it is responsible for and supports in writing the advice its brokers are rendering.

Not one such firm exists. Such permission to act in a fiduciary capacity is very rare and is only granted by exception of circumstance and the broker's skill. Otherwise, brokers do not render advice and it is a violation of internal compliance protocol for brokers to acknowledge they render advice and have ongoing fiduciary duties to act in the client's best intererst.